Datang Telecom (Datang Telecom Technology & Industry Group) is always a hot item in 3G concept stocks. Although the business performance of Datang Telecom is not ideal, because of its decisive position in TD-SCDMA, its stock price is increasing at an inconceivable growth rate.

Both Datang Telecom and Datang Mobile (Datang Mobile Communications Equipment Co. Ltd) are subsidiary companies of China Datang Corporation. The listed company Datang Telecom mainly manages products relating to micro electron and intelligent chips, while the Datang Mobile develops the standard of TD-SCDMA. Datang Mobile is not a listed company. However, benefiting from the 3G concepts of Datang Mobile, the stock price of Datang Telecom, has gained an accumulative increase recently. For Datang Telecom, which had a deficit of RMB 690 million (USD 89.1 million) in 2005 and had income less than RMB 0.1 (USD 0.013) per share in the third quarter of 2006, its present grow rate is astonishingly high.

The further solving of 3G difficulties and the increasing emergence of news about 3G has led to the recent stock activity of Datang Telecom. However, these events don’t imply that all listed companies related to 3G will be able to gain profits. The starting of the 3G market comes on the heels of various strategies of “capital outlay”. Even if the telecom operators operated 3G right now, they would have to draw experiences from the operation of overseas 3Gs and take a comparatively cautious attitude to 3G equipment purchases and the large-scale investment in 3G.

According to the present profit achievements, experts believe that Datang Telecom is overvalued at a stock price of RMB 20 (USD 2.58) per share and will only maintain these levels in the short term. Although TD-SCDMA will continue to develop in China, investors in the concept stocks should temper their expectations.   .